• Shareholder Returns: $2.7 billion returned through share buybacks and dividends.
• Profit Margins: Focus on improving profit margins despite economic challenges.
• Free Cash Flow: Efforts to boost free cash flow highlighted.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Kraft Heinz Co (NASDAQ:KHC) returned $2.7 billion to shareholders through share buybacks and dividends, providing the highest yield in the food industry.
• The company has locked in 75% of new customer wins in the Away From Home segment, contributing to a 40% year-over-year incremental growth.
• In Emerging Markets, The Kraft Heinz Co (NASDAQ:KHC) plans to increase distribution by 40,000 additional points in 2025, building on a 17% increase from the previous year.
• 75% of the 2025 innovation pipeline is already secured, indicating a strong focus on product development and market readiness.
• The company is investing in technology-led solutions to drive efficiencies and improve margins, alongside increased consumer-facing marketing efforts.

Negative Points

• The Kraft Heinz Co (NASDAQ:KHC) faces challenges in achieving volume growth for key brands, with concerns about whether current investment levels are sufficient.
• The company is experiencing market share softness in the US, particularly in the Retail segment, which is impacting overall performance.
• There is a lingering supplier issue affecting the Lunchables brand, which is expected to continue impacting sales into the first quarter of 2025.
• The company's tax rate is expected to increase by 500 basis points in 2025, impacting the P&L, although cash tax rate impact is lower.
• Despite improvements, the company's marketing spend as a percentage of revenue remains below some peers, raising questions about sufficiency in competitive dynamics.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with KHC.

Q: Carlos, you mentioned plans for disciplined reinvestment this year, expecting gross margin expansion and flat pricing in 2025. What gives you confidence that this plan provides adequate investment to get key brands back into volume growth? A: Carlos Abrams-Rivera, CEO: We increased our margin by 100 bps in 2024 and expect a modest expansion in 2025. Our growth pillars are already in motion, with 75% of new customer wins locked in for Away From Home and a 17% distribution increase in Emerging Markets. In North America Retail, 75% of the 2025 innovation pipeline is secured. We're investing in price, product, and marketing, leveraging technology-led solutions for efficiency, and shifting more marketing dollars towards consumer-facing efforts.

Q: How are you thinking about the growth rates for each of the pillars within the organic sales guidance for 2025? A: Andre Maciel, CFO: Emerging Markets will see gradual improvements, exiting at double-digit growth. Away From Home will improve slightly in Q1 and build throughout the year, exiting around mid-single-digit growth. In the US, most improvement will come from the Accelerate platforms, where we're investing in price and product enhancements.

Q: Are you seeing any impact from GLP-1 injectable weight-loss drugs, and what opportunities are there to meet the needs of these patients? A: Carlos Abrams-Rivera, CEO: We haven't seen a meaningful impact from GLP-1. Consumers using these drugs often seek more protein and hydration options. We're highlighting protein content in products like Oscar Mayer, Lunchables, and Heinz beans, and ensuring our portfolio offers taste elevation for any protein consumers use.

Q: Can you provide an update on the Lunchables business recovery, considering the supplier issue in Q4? A: Carlos Abrams-Rivera, CEO: The supplier issue will improve significantly by the end of Q1. We're investing in the business with better quality, ingredients, and innovation. Despite current softness, we expect improvements as we resolve these issues and enhance the product.

Q: What is driving the increase in your tax rate for 2025, and how does it compare to other companies? A: Andre Maciel, CFO: We recorded a $2.4 billion tax benefit in Q4 linked to a business operation transfer, reducing cash impact from global minimum tax regulations. This results in a 500 bps increase in the P&L tax rate for 2025, but only a 200-300 bps increase in the cash tax rate, which is our primary focus.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.